Economy: Housing

Why is this Important?

San Mateo County has some of the highest housing costs in the nation. A lack of affordable housing limits the ability of people to live in the county and can reduce the availability of qualified workers for local jobs, thereby constraining economic growth. In response to high housing prices, many workers are forced to either live outside the county and face long commutes or stretch themselves financially and pay more than they really can afford for housing. Approximately 60% of those employed in San Mateo County commute in from other counties for work, which leads to increased traffic congestion and vehicle-related emissions.

After declining for several years, housing prices and rents in the county are on the rise. Increased property values may be welcome news for many current homeowners, but for first-time buyers or people relocating to the area, it only exacerbates the difficulty of purchasing a home in the county.

The county’s housing supply shortage is a primary driver of high housing costs. The Regional Housing Need Allocation (RHNA) is part of a state-mandated process that creates housing production targets for each county in order to increase the supply of housing throughout California. The 2014-2022 RHNA target for San Mateo County is 16,418 new housing units, with 43% of them required to be affordable housing (for very-low and low income residents).

What is a Sustainable State?

In a sustainable state, a sufficient supply of housing is available to all members of society, and new housing supports diverse communities and healthy environments. Local governments consider the housing needs of people of all income levels when planning for new development. Zoning regulations allow for higher density housing located in downtown areas and along transit corridors to meet the needs of our growing population, build community, support transit ridership, and help reduce greenhouse gas emissions.

Key Findings

Housing prices have increased drastically over the past five years. In 2015, the median sales price (MSP) for a single family home was $1,250,000, an increase of 19% from 2014 and 37% from 2013.

In 2015, market average rent for a 1-bedroom unit was $2,562 (+5.5% from 2014), while market average rent for a 2-bedroom unit climbed to $2,856 (+4.4%).

In 2015, 35% of households in the county with a mortgage are paying more than 35% of their income on housing.

Nearly 45% of the county’s housing stock was built before 1959, and only 22% has been built since 1980. This makes the county’s housing stock considerably older than California’s average.

The most recent Regional Housing Needs Allocation production target for San Mateo County is 16,418 new housing units between 2014 and 2022, with 43% of these required to be affordable housing (very-low and low income), 17% for moderate income, and 40% for above moderate income.

Woodside and Hillsborough were the only two cities to exceed the RHNA projected housing needs between 2007 and 2014. Foster City, Redwood City, and San Bruno built at least 50% of their RHNA projected housing needs as well.

Between 2007 and 2014, 56% of the housing built in San Mateo County was at market rate.

Housing construction is on the rise after reaching a low point in 2010. In 2012, 877 building permits were issued in San Mateo County, up 7% from the year prior. Multi-family housing units made up 59% of these permits, slightly lower than the 72% of multi-housing units the year prior. New housing construction will need to increase significantly in the coming years to meet the production targets of the Regional Housing Needs Allocation.

Between 2014 and 2015, 339 residents migrated outside of the county, while home and apartment prices continue to rise. Though the median income has increased, lower income residents are getting priced out of the county.

Housing Affordability

The annual median home price in San Mateo County increased 19% since 2014.

MSPs have increased by 82% and 92% for homes and condominiums, respectively, since a 15-year low in 2011.

Market average rent continued to climb in 2015, though at a lower rate than the previous year. The cost of a 1-bedroom was up 5.5% and a 2-bedroom was up 4.4% from 2014.

Since 2006, average rent is up 43% for a 1-bedroom and 42% for a 2-bedroom.

Out of Reach

The National Low Income Housing Coalition’s 2014 Report “Out of Reach” documents the shortage of affordable housing throughout the United States. Over half of all renters in the country are cost-burdened, meaning they pay more than 30% of their income on housing.

According to the Report, in order to afford a 2-bedroom unit at fair market rate in San Mateo County, a renter would need to earn an hourly wage of $37.62 (equivalent to annual income of $78,240 or 4.7 full-time jobs at minimum wage). San Mateo County is tied with San Francisco and Marin Counties for having the highest rental costs in the U.S.

The chart does not factor in the down payment required to purchase a home, just the annual costs of owning the home (assumes housing costs are 35% of gross annual income).

A median priced home in the county is out of reach for a household earning the county’s median family income (for a family of three).

In 2014, 35% of homeowners were paying over 35% of household income towards housing costs. Historically, the expected percentage of income allocated for housing was 30%.

Hope for Affordable Housing

Housing affordability in California has become a long-term problem with few solutions available to policymakers. State legislators may have one such solution in the works. Assembly Speaker Toni Atkins has proposed a bill that would levy a $75 fee on real estate transactions, helping finance new apartments for low and moderate income families in California. Atkins’ bill would also set up guidelines to allocate federal housing money and use a portion of the funds from Prop 47, a proposition which lowers certain felonies to misdemeanors, to fund housing for recently released inmates. The plan would create nearly half a million dollars for affordable housing funds.

Housing Supply

The Regional Housing Need Allocation (RHNA) is part of a state-mandated process that creates housing production targets for each county based on existing need and forecasted population and job growth. The goals are to increase the supply of housing and to ensure that local governments consider the housing needs of people of all income levels.

Production targets are broken down by income, with housing goals set in each county by income levels. Each income level is defined as a percentage of area median income: e.g., very low = 0-50% of area median income.

The 2014-2022 RHNA for San Mateo County is 16,418 new housing units, with 43% of these required to be affordable housing (very-low and low income), 17% moderate, and 40% above moderate.

Between 2007 and 2013, only two cities, Hillsborough and Woodside, satisfied the RHNA Housing projections.

The three cities that have made the most progress towards the RHNA housing projections so far are Redwood City (84%), San Bruno (77%), and Foster City (63%).

San Bruno has built 80% of their projected affordable housing needs.

San Mateo County as a whole has built 31% of the 15,738 units projected.

Housing construction in the county is on the rise after bottoming out in 2010. In 2013, 877 building permits were issued, an 11% increase from the year prior. The percentage of multi-family units is on an upward trend. In 2013, 59% of building permits were for multi-family construction.

Housing our Growing Population

By January 2015, all twenty-one San Mateo County jurisdictions are required by the state to update the Housing Element of their General Plan. The Housing Element is a vital tool cities use to plan for housing to accommodate their growing and changing populations. It outlines strategies and locations where cities have the best opportunity to meet housing goals, while ensuring that new development enhances the qualities that make our communities livable and unique. To aid in this effort, the San Mateo County Housing Element Update Kit, otherwise known as “21 Elements”, is a collaborative project that aims to encourage and assist with the production and certification of high quality Housing Elements in the county. More broadly, this collaboration intends to strengthen local partnerships and develop solutions to housing needs throughout the county. For more information, visit www.21elements.com.

Public participation is an integral part of the Housing Element update process. Municipalities have held, and will continue to hold, meetings to provide the public with opportunities to help shape their communities. The best way for members of the public to get involved is to contact your local city or town for a schedule of upcoming Housing Element workshops.